Four reasons some organizations thrive after a global recession while others struggle to stay afloat.
by Jayan R, Supreet Kulkarni & Zachary Mendiz - dss+
Organizations adopt a variety of strategies in the face of a recession—some halt spending to tide over the wave, while others use the decline as a launching pad to invest and retool. Which approaches make the best sense for today? To find out, dss+ analyzed research from past corporate strategies as well as reviewed our own experience, ultimately identifying four themes that contribute to healthy organizational resilience and post-recession success.
What Does “After” Look Like?
The IMF characterizes a global recession as a contraction in GDP per capita, combined with a broad decline in global economic activity and employment, over an extended period. By these terms, there have been several global recessions since 1970, including the current economy. India, by contrast, managed to grow through many of the global downturns, making the current recession its first in four decades. Analyzing peaks and troughs has shown that global business cycles last for an average of nine years, with recessions lasting at least a year and recovery stretching from three to five years or longer.
It can be difficult to recognize when the economy begins to trend upward, but recoveries share a few key characteristics:
• Increased economic activity on multiple fronts, including consumption, investment and international trade.
• Rebound in industrial productivity with a surge in per capita global output as worldwide consumption is revived.
• Return to typical growth, which generally mirrors average economic growth performance.
• Declining inflation and interest rates, as monetary policies are often directed to support the rebound.
• Continuing high unemployment levels - the global unemployment rate tends to lag other indicators, making it an unreliable gauge early on.
Fortunately, periods of recovery and expansion tend to far exceed recession in terms of economic growth, stock index returns, employment and duration.